Mortgage Daily

Published On: December 23, 2022

USDA Mortgage Rates Are Lower Than Most

The USDA housing loan has enabled millions of Americans to purchase houses in rural and suburban communities.

However, this program now offers robust refinancing choices to encourage more affordable homes.

The USDA loan rates are very low.

Frequently, these mortgage rates exceed their conventional equivalents (i.e., Fannie Mae and Freddie Mac) by a quarter-point or more.

The potential savings from USDA refinancing are increasing.

In addition, the popular USDA streamline refinancing is now available in all fifty states. After a trial program’s success in 34 states, the service was rolled out nationally in 2017 and is still accessible in 2023.

Now, thousands more U.S. homeowners have access to refinancing without an appraisal and with an unrestricted LTV.

USDA Streamline Refinance Program

The USDA streamline refinancing program is available to homeowners with a USDA mortgage. In 2012, the program was made public.

The streamlined USDA program was intended to resemble other successful streamlined programs, including the FHA streamline refinancing, the VA streamline refinances (IRRRL), and the HARP program from Fannie Mae and Freddie Mac.

This program, also known as the USDA Streamlined-Assist Refinance, has low eligibility requirements and quick underwriting and closings.

USDA loans close rapidly due to the agency’s minimum qualifying requirements.

  • The refinance property must be your principal residence.
  • The mortgage must be a USDA Direct Home Loan or USDA Guaranteed Home Loan.
  • You must have made 12 consecutive on-time payments before applying.
  • Your monthly payment must decrease by at least $50

And that concludes it. No credit report requirements, house appraisal, or property inspection requirements for the USDA streamline refinancing exist.

And you are not required to qualify based on your current salary. Current paperwork is required to guarantee that you meet USDA income guidelines.

The USDA streamline refinance program accepts most credit scores, and loan-to-value is not considered. As readily as a homeowner with 20% equity may use the program, underwater homeowners can also.

This financing allows you to include the closing expenses and escrow fees in the loan amount. This lets homeowners obtain a refinancing with no out-of-pocket costs, for which no cash is required upfront.

USDA Streamline Refinancing Is Now Offered in All 50 States

The USDA streamline refinancing program was initially restricted to a subset of states when it was originally established.

This was done since the program was new, and the USDA intended to roll it out in “beta,” so to speak. With restricted distribution, it would be easier to uncover software flaws and implement modifications with minimal impact on U.S. households.

The USDA opted to make its nascent simplified refinancing program available in the 19 states it deemed “hardest impacted” by the economic slump of the past decade. The USDA believed homeowners in these 19 states would gain the most from the program.

Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, and Tennessee were the original 19 states selected for the USDA streamline refinancing pilot program.

The software was functional.

The USDA streamline refinancing allowed U.S. homeowners access to cheap mortgage rates and provided USDA-backed households with genuine payment relief.

Due to the initiative’s effectiveness, the U.S. Department of Agriculture decided to expand its national footprint by 15 states, bringing the total to 34.

After several successful testing, the program is now available in all fifty states. This effective rate reduction scheme is available to USDA loan holders in all regions.

There Are Now Three USDA Refinances

USDA provides a variety of refinancing options to accommodate diverse homeowner circumstances.

USDA Streamlined-Assist

The USDA Streamlined-Assist program is probably the most popular and advantageous kind of refinancing the agency offers.

There are no appraisal, credit, or income requirements for this loan. Plus, underwater properties are eligible.

However, the USDA offers two more refinancing options for other homeowners.

Standard Streamline Refinance

This USDA standard streamline program adheres to similar guidelines as the Streamlined-Assist loan.

No appraisal is necessary, and submerged properties qualify.

However, this solution needs more flexibility in other respects. For example, USDA home purchase loans need current income documentation and compliance with debt-to-income ratio requirements.

Additionally, regular streamline borrowers need help to refinance their closing fees. Up-front cash may be required.

So why would a homeowner select this alternative?

Two factors:

  • $50 is not required to be deducted from the payment
  • Existing borrowers may be removed from the note if at least one original borrower remains.

In the event of a divorce, a homeowner may choose for a regular streamline loan to remove the ex-spouse from the mortgage.

Similarly, if the monthly payment is reduced by only $40 per month, the homeowner is ineligible for a Streamlined-Assist loan and must select the conventional streamline option.

USDA Non-streamline Refinancing

USDA also provides a basic “full” refinancing comparable to the non-streamline choices offered by Fannie Mae and Freddie Mac.

This loan requires an assessment, and the maximum loan amount is equal to the property’s current market value plus a new guarantee charge.

Borrowers must fulfill equal credit and income requirements for USDA home purchase loans.

To bypass the $50 payment reduction requirement for the streamline refinance option or to remove a borrower from the note, a homeowner might utilize this loan type.

In addition, unlike the regular streamline, this non-streamline option permits the closing expenses to be folded into the new loan if the new assessed value is sufficient.

Where Can I Locate a Lender Offering USDA Streamline Refinancing?

Consumers should be aware that not all lenders offer the USDA streamline refinancing program (as this reader found out).

That is typical. Lenders decide which loan products to provide based on the volume of business they anticipate receiving from them.

Some lenders will not provide a certain sort of loan, and another lender will specialize in that loan to pick up the slack.

As a mortgage customer, you should continue to visit local and national banks in person and online until you locate one that provides the needed program.

Additional USDA Streamline Refinancing Notes

The USDA’s simplification has further benefits.

One possibility is that you can minimize your annual cost.

The USDA decreased its fees as follows in October 2016.

  • Previous yearly fee: 0.50%
  • New yearly fee: 0.35

Additionally, the upfront cost was reduced from 2.75 percent to 1 percent. This makes a USDA streamline refinancing more inexpensive initially and on a recurring basis. The increased costs assist homeowners in meeting the Streamlined-Assist program’s minimum monthly payment reduction requirement of $50.

In addition, you are geographically qualified for a USDA refinancing, even if eligibility maps have changed since you purchased your house. Not current USDA maps determine your eligibility as a USDA homeowner.

USDA refinances minimize homeownership expenses, but many USDA borrowers want to know if cash-out refinancing is available.

All USDA refinancing kinds are “rate-and-term” loans, prohibiting cash withdrawal after closing.

Nevertheless, with all the various USDA refinance choices, homeowners are saving significant amounts of money each month, putting millions of dollars into the pockets of USDA homeowners worldwide.

Check Your Eligibility for USDA Streamline Refinancing

The mortgage rates of today are still relatively low. There are prospects for refinancing and substantial cost savings. In addition, the USDA streamline refinancing makes it easy to determine eligibility and obtain a new, lower-rate mortgage.

Examine today’s actual mortgage rates immediately. There is no requirement for your social security number to begin, and all quotations include quick access to your real credit scores.


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